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JP Morgan GEM equity & debt chiefs unite for Total Income fund
by Robert St George on Oct 31, 2013 at 10:39
The chief investment officers for emerging market equities and debt at JP Morgan Asset Management are to unite and jointly run a new ‘total income’ fund targeting an annualised yield of 6%.
The JP Morgan Total Emerging Markets Income fund will be co-managed by Richard Titherington and Pierre-Yves Bareau, respectively the firm’s chief investment officers for emerging market equities and emerging market debt.
The duo – supported by a team of more than 75 investment professionals across eight JP Morgan offices – will employ both top-down and bottom-up approaches to asset allocation, managing risk through a currency overlay and liquidity assessment.
‘Broadening the emerging markets opportunity set to incorporate both equity and debt has the potential to provide strong risk-adjusted returns and a stable source of income,’ said Titherington (pictured).
‘Investors are increasingly realising emerging markets can be a source of growth as well as yield, but are mindful of managing volatility. Combining debt and equity exposure can offer diversification.’
Titherington’s largest other vehicle is the £1.5 billion JP Morgan Emerging Markets Opportunities fund, which he has headed since 2009. During his tenure the fund has returned 69% compared with 42% by its benchmark MSCI Emerging Markets index.
By style, Titherington focuses on valuations, and on this basis is bullish about the outlook for emerging market equities.
In particular, he has highlighted that such stocks currently trade on an average of 1.5 times their book value. ‘Over the past 15 years, instances of such low valuations have been seen almost exclusively during global crises, and the outcome has generally been the same, namely strong performance over the subsequent one and three-year periods,’ he said.
Bareau too is conscious of valuations, but has recently increased his risk exposure after the broader flight from emerging market debt. His Emerging Markets Strategic Bond fund has returned 18% since its inception in April 2011, compared with 13% by its peer group.
Separately, Bareau won a £500 million mandate for this strategy last week from a UK pension fund. This bucks the wider exodus from the asset class: according to JP Morgan, more than £20 billion has been withdrawn from global emerging market debt funds over 17 consecutive weeks of outflows.
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